W in t e r En e rg y

Ap p ra is a l
Winter Outlook 2022-2023
In compliance with MCL 460.6r

November 21, 2022

MPSC Staff

LARA
LICE~Slr-..G A'\JD REGULATOKY AFAIRS

i
Co n t e n t s
Glossary .................................................................................................................................................................................. i

Preface ...................................................................................................................................................................................ii

Executive Summary ................................................................................................................................................... iii

Data and Methodology .............................................................................................................................................. 1

Trending Topics .............................................................................................................................................................. 2

Distributed Generation...................................................................................................................................... 2

Low Carbon Energy Infrastructure ............................................................................................................ 2

Customer Assistance........................................................................................................................................... 2

Propane................................................................................................................................................................................ 2

Natural Gas ........................................................................................................................................................................ 6

Distillate Fuels ................................................................................................................................................................. 9

Electricity .......................................................................................................................................................................... 10

Motor Gasoline ............................................................................................................................................................... 15

Petroleum..........................................................................................................................................................................16

U.S. Outlook ..............................................................................................................................................................16

World Outlook ........................................................................................................................................................ 17

Michigan Household Winter Heating Fuel Summary ....................................................................... 18

Conclusion ........................................................................................................................................................................19
Glo s s a ry

Barrel A unit of volume equal to 42 U.S. gallons.

b/d The abbreviation for barrel(s) per day, also displayed as bbl/d.
Bcf The abbreviation for billion cubic feet.
Brent Brent is a major trading classification of sweet light crude oil that
serves as a major benchmark price for purchases of oil worldwide.
CDD Cooling Degree Days - a measure of how warm a location is over a
period of time relative to a base temperature, most commonly
specified as 65 degrees Fahrenheit. Cooling degree days are used in
energy analysis as an indicator of air conditioning energy
requirements or use.
EIA Energy Information Administration - the statistical and analytical
agency within the U.S. Department of Energy.
GWh One billion watthours.
GCR Gas Cost Recovery - the actual cost of natural gas that a local
distribution company pays to purchase natural gas for your use.
HDD Heating Degree Days - a measurement designed to quantify the
demand for energy needed to heat a building. A measure of how
cold a location is over a period of time relative to a base temperature,
most commonly specified as 65 degrees Fahrenheit.
LSE Load serving entity - a cooperative, municipal, investor-owned utility,
or an alternative electric supplier (AES) that provides electricity to its
customers.
Mcf One thousand cubic feet.
MISO Midcontinent Independent System Operator –a regional
transmission organization (RTO) that coordinates the movement of
wholesale electricity in all or parts of 16 states and one Canadian
province.
mmBtu One million British thermal units.
MW One million watts of electricity.
OECD Organization for Economic Cooperation and Development - an
intergovernmental economic organization with 35 member
countries, founded in 1961 to stimulate economic progress and world
trade.
OPEC Organization of the Petroleum Exporting Countries
PJM PJM – an RTO that coordinates the movement of wholesale
electricity in all or parts of 13 states and the District of Columbia.
STEO Short-Term Energy Outlook published monthly by EIA.
WTI West Texas Intermediate (also known as Texas light sweet) – a grade
of crude oil used as a benchmark in oil pricing.

i
P re fa c e
The Michigan Energy Appraisal is a semiannual assessment of Michigan’s energy
baseline. The assessment raises the situational awareness of the state’s energy
environment including recent events impacting supply and prices, expected
conditions, and changes over the next six months. Additionally, it provides the
necessary information to enable a reliable assessment of the risk posed by an energy
supply disruption.

After several publications of the Energy Appraisal which focused on the impacts of
COVID-19 and the uncertainties for Michigan’s energy systems, this winter’s edition
returns to providing short-term outlooks for select energy supply and demand
dynamics. Due to data availability issues, Michigan-specific outlooks for petroleum
energy sources (propane, distillates, and gasoline) are unavailable for this edition.
However, these energy sources are still discussed in a broader context.

Although COVID-19 still poses a risk to Michigan residents, there are signs of economic
recovery and the return to more historical consumption patterns for energy products.

This report is prepared by the Energy Security Section of the Michigan Public Service
Commission (MPSC) with assistance from the Energy Operations, Energy Resources,
and Regulated Energy Divisions of the MPSC, Department of Licensing and
Regulatory Affairs (LARA), State of Michigan.

Project Manager Alex Morese

Propane Ethyan Kramer
Distillates Ethyan Kramer
Natural Gas Nora Quilico, Ethyan Kramer
Electric Ethyan Kramer
Gasoline Ethyan Kramer
Petroleum Ethyan Kramer
Trending Topics Ethyan Kramer

A major source of data and analysis used in this appraisal is the federal Energy
Information Administration (EIA) at http://www.eia.doe.gov. The EIA collects national,
state, and international data on energy usage, prices, supply, etc., and provides expert
analysis on trends in energy.

Comments or questions on this appraisal are welcomed and may be directed to Alex
Morese, Michigan Public Service Commission, at moresea@michigan.gov.

[J
The Department of Licensing and Regulatory Affairs will not discriminate against any individual
or group because of race, sex, religion, age, national origin, color, marital status, disability, or
political belief. If you need assistance with reading, writing, hearing, etc., under the Americans
with Disabilities Act, you may make your needs known to this agency.

ii
Exe c u t ive Su m m a ry
Energy use in Michigan is closely tied to economic activity within the state. Motorists
use gasoline to travel to and from work, companies move goods throughout the state
by trucks and trains powered by diesel fuel, the industrial sector uses natural gas as a
fuel for their manufacturing processes, and all sectors use electricity to light either
their homes, businesses, or factories. Of particular note for this Energy Appraisal is the
current price volatility within energy markets and the uncertainty surrounding future
price projections. The EIA geographically aggregates price projections into Petroleum
Administration Defense Districts (PADDs) – which means prices in individual states
may eclipse the regional PADD average for a given forecast period.

The core analyses in this winter’s edition of the Michigan Energy Appraisal were
compiled by Staff at the Michigan Public Service Commission and projections sourced
from the federal Energy Information Administration.

Some key report findings for Michigan energy sectors:

 Consumption of natural gas for all sectors is expected to see a 13.8 percent
increase in 2022, led by increased demand from the residential and electric
power generation sector. Residential demand is expected to increase by 13
percent.
 Residential propane prices beginning in October 2022 averaged $2.47/gallon,
an increase of 8 cents (3.3 percent) compared to last year.
 No. 2 heating oil prices started the 2022/23 heating season $1.29/gallon (41
percent) higher than last year at an average of $4.40/gallon.
 Electricity demand is forecast to increase 1.5 percent in 2022. The largest
growth is expected in the industrial sector (4.8 percent), with the commercial
also up (0.9 percent) while residential (-0.3 percent) declines marginally.
Residential electric rates edged up slightly, as customers of investor-owned
utilities saw a median rate increase of 2.3 percent between October 2021 and
October 2022.
 Average Midwest gasoline prices are expected to average $3.89/gallon for
2022 and $3.46 in 2023.

iii
D a t a a n d Me t h o d o lo g y
A vast majority of the predictive energy data (consumption, prices, and stocks) used
in this appraisal’s models are from EIA forecasts drawn from their Short-Term Energy
Outlook (STEO). Energy supply and demand is often dependent upon weather-related
variables. Therefore, variables such as heating and cooling degree days are also heavily
used in the forecasts. Heating and cooling degree days are a commonly used metric
for calculating building energy consumption. Deviations from “normal” degree day
figures are helpful in understanding variations in consumption of energy
commodities (see chart). Future degree day deviations cannot be known at the time
Michigan Cooling Season Deviations from Normal the appraisal forecasts are made,
90% so assumptions are needed. For
77% Warmer ■ 2021
any model using degree day
■ 2022
70%
60% deviations, the assumption is
made that future weather
56% 54%

50%

conditions will be approximately

30% 26%
“normal” and there will be no
10% 7%
deviations from the historical
average degree day figure
-10% calculated by the National
-18%
Climatic Data Center at that
given point in time during the
-30%

Cooling Season
-50%
Colder
Total
forecast period.

Monthly data is used for all forecasts in this appraisal. However, certain variables used
in the appraisal models are only reported, or predicted, on a quarterly basis from their
respective source. Quarterly data leaves data gaps in the monthly time series,
therefore extrapolation tools are needed. A cubic spline interpolation tool, used for
curve fitting, is employed to acquire the approximate monthly data points in between
the quarterly figures that were available for use in the models.

The forecast models used for the Appraisal are, for the most part, derived from EIA
forecast models used in their preparation of the STEO. More specifically, these forecast
models are called ARIMA (Auto Regressive Integrated Moving Average) models.
ARIMA models are an econometric tool used by analysts to better understand the
relationship between variables, or to predict future points in a time series. The auto
regressive and moving average portions of the model mean that past observations
and past forecast errors are used in prediction of future observations. The integrated
portion of the model means that a transformation was applied to the data for
statistical purposes.

Forecast models are frequently evaluated and updated in order to provide as accurate
information as possible so that future energy expectations can be built. However,
given that the forecasting models used in this appraisal partly use predictions,
extrapolated data, and assumptions of normal weather, the potential does exist for
the forecasted value at a given point in time to vary from actual observed values for
the same point in time.

1
Tre n d in g To p ic s
Ele c t ric O u t a g e Co m p lia n c e a n d Sa fe t y Re g u la t io n s
On October 4, 2022 the MPSC ordered Consumers Energy Co. and DTE Electric Co. to
report to the Commission on their compliance with regulations and past
Commission orders governing utilities’ response to outages and downed lines, and
directed MPSC Staff to take action to begin a third-party audit and review of all
equipment and operations of the two utilities’ distribution systems. The
Commission’s steps in Case No. U-21305 come amid mounting frustration from the
public and the MPSC with a pattern of widespread, lengthy outages from
increasingly severe storms in Michigan.

D is t rib u t e d Ge n e ra t io n
Participation in Michigan’s distributed energy program rose by 37% in 2021,
according to the MPSC’s annual distributed generation (DG) report. Participation has
grown every year since 2006, and the report released November 14 found that the
program added 3,709 new customers, with the total number of customers in the
program at 14,262, with 14,446 DG installations. That’s up from 10,553 customers and
10,718 installations in 2020.

Lo w Ca rb o n En e rg y In fra s t ru c t u re
The MPSC on September 30, 2022 issued a request for proposals (RFP) for Low-
Carbon Energy Infrastructure Enhancement and Development Grants. Public Act 53
and Public Act 166 of 2022, approved by the Michigan Legislature and signed by Gov.
Gretchen Whitmer, provide for a combined $50 million in grants for businesses,
nonprofit organizations and local governments to develop, acquire or build low-
carbon energy facilities that may include natural gas, combined heat and power or
renewable natural gas facilities as well as electrification programs.

Cu s t o m e r As s is t a n c e
Earlier this month, the MPSC unveiled its new energy assistance webpage designed
to bring together, in one place, information and links to ways Michigan energy utility
and telecommunications customers can find financial assistance to help them keep
the lights and heat on and stay connected. The website,
www.michigan.gov/mpsc/gethelp, includes information and links to state and utility
company programs that offer energy bill assistance to income-qualified households,
including State Emergency Relief, access to the Michigan Energy Assistance
Program, and the annual Home Heating Credit, all of which provide financial
assistance for families struggling with home energy costs. It also includes links to
contact info for all of the natural gas and electric utilities whose rates are regulated
by the MPSC.

P ro p a n e
De m a n d
According to the EIA, about 5 percent of U.S. households heat with propane;
however, in Michigan it is estimated to be a little more than 8 percent. Weather
remains the largest determinant of propane use for residents. Heating degree day

2
(HDD) forecasts by the National Oceanic and Atmospheric Association (NOAA)
indicate Michigan may experience slightly below normal temperatures throughout
the 2022/23 winter heating season, totaling 5,341, 0.4 percent higher than the 1981-
2010 normal of 5,321 HDD units.

Fig u re 1

Mic h ig a n His t o ric a l P ro p a n e D e m a n d

70,000 1600
60,000 1400
Thousands of Gallons

Heating Degree Days

50,000 1200
J 1000
l

40,000
800
30,000
j
J 600
20,000 I/ ~ \. ~/ j I\ ) ""-
400
~

V '-../ \../'
10,000 I . 200
0 I I 0

- Heating Degree Days Propane Demand

Source: Energy Information Administration

Another primary use for propane in the Midwest, including Michigan, is for the
drying of harvested corn crops. When corn crops are planted late in the spring, or
when the fall is especially wet, demand for propane from the agriculture sector may
rise due to the increased need to dry down their crop for it to be stored without high
risk of spoilage. As of October 11, 2022, many Midwestern states including Michigan,
Iowa, Nebraska, Wisconsin, and Minnesota were showing corn maturity progress
ahead of the five-year average – an indication there may be reduced propane
demand for grain drying this fall.

Su p p ly
U.S. propane production remains high – averaging 2.49 million b/d to begin October
as propane export demand continues to be strong. The average Midwest propane
production for the week ending November 4, 2022 was 521,000 b/d, an increase of 9
percent from the same period last year.
According to the EIA, U.S. inventories of propane and propylene stood at 87.7 million
barrels as of November 4th, 17 percent above levels seen at the same time last year.
PADD 2 (Midwest) propane and propylene stocks totaled 25.2 million barrels as of
November 4 (up 88 thousand barrels from 2021), 3.2 percent below the five-year
average for this time of the year.

3
 Fig u re 2
Midwest Propane Inventory
30,000

25,000
V">

~
co 20,000
co
""O
c::
co
V">
::::,
15,000
0
..c::
I-
10,000

5,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

- 5 Year Range - 2022 - 2021 - 5 Year Average

Sou.--ce; E n eryy lr1fur rnc:1Liur1 AdrT1ini:slrc:::1liur1

In addition to domestic propane supply, many regions of the U.S. rely on supplies
from Canada that are transported by pipeline, rail, and truck. Major Canadian
underground storage facilities are primarily located in western Canada (Alberta) and
in eastern Canada (Ontario). According to the MPSC’s Statewide Energy Assessment,
approximately 18.7 million barrels of underground cavern storage capacity for
hydrocarbon gas liquids, such as propane, is located in Ontario near the Sarnia and
Windsor areas. According to Canada Energy Regulator data, underground propane
stocks to begin September totaled 4.04 million barrels in eastern Canada, and 7.5
million barrels in western Canada – 11.2 percent and 13.8 percent above five-year
averages for the time period, respectively.

Fig u re 3

Canadian Underground Propane Stocks

10,000
9,000

V)
8,000
QJ 7,000
t:
=<O

""O
6,000
C: 5,000
<O
V)
CJ 4,000
0
..r:: 3,000
f-
2,000
1,000
0
)3(\-'\6 oc.t-'\6

■ Western Canada (1,000 bbls) ■ Eastern Canada (1,000 bbls)

Source: Canada En ergy Regulator

4
P ric e
According to the EIA, wholesale propane prices in Michigan started this heating
season at $1.10 per gallon (46 cents lower than prior year), an indication of a better
supply situation. Higher oil and natural gas prices, which feed into propane prices,
will likely lead to an increase in prices paid for propane this winter. For the week of
November 7, 2022, the average residential propane price in Michigan was around
$2.49 per gallon.

Fig u re 4
Mic h ig a n Re s id e n t ia l P ro p a n e & He a t in g O il P ric e s
'i? b.'.l
2021-2022
• Heating Oi l • Propane

$4.00

$3 .00

Source: https://www.michigan.gov/mpsc/0,9535,7-395-93308_93325_93424---,00.html

5
Na t u ra l Ga s
De m a n d
Assuming normal winter
weather through the 2022/23 Figure 5
heating season, total natural gas 2021 Michigan Natural Gas Usage
sales in Michigan from all sectors
are projected to increase by 13.8
percent in 2022 to 991.4 billion
cubic feet (Bcf). However, should Electric
Michigan experience a warmer Power Residential
29% 34%
than normal winter, usage for
space heating could decrease
and lower demand. Higher total
natural gas sales for 2022 are
Industrial Commercial
driven primarily by an increase in 18% 19%
demand from the residential and
electric power generation
sectors. The electric power Source: Energy Information Administration
generation sectors’ consumption
of natural gas is expected to grow 19.6 percent for 2022 – which is a significant rebound
from the 9.6 percent decline seen in 2021 and largely reflects growth in electric
demand from the state’s industrial sector. Michigan’s industrial production and
manufacturing indices are expected to grow by 2 percent and 7 percent for 2022,
respectively. Residential natural gas consumption – where it is used to heat about 77
percent of Michigan households – is estimated to rise by 13 percent due to a projected
12 percent increase in total heating degree days for the year.

Su p p ly
Storage levels in Michigan are projected to be 448 Bcf to end 2022, which is 9.5
percent lower than the previous year’s end. Michigan has over 10 percent of the
nation’s available underground storage capacity for natural gas, the largest of any
state. Working gas storage inventories for the lower 48 states were 3,580 Bcf for the
week ending November 4, 2022, 1 percent lower than the same time last year. Natural
gas storage levels are normally at their lowest levels by the end of the heating season
in March and are built up during the summer months. Storage injection typically
begins after the end of the heating season and is sensitive to both current market
prices as well as price expectations for the upcoming heating season. About 10% of
Michigan’s natural gas needs are supplied via its own natural gas production wells.
However, this production continues to slowly decline as the wells age and production
decreases, becoming uneconomical.

6
 Fig u re 6
Michigan Working Gas in Underground Storage
700000
600000
+->
500000
<IJ
<IJ 400000
u.
u 300000
15
u 200000
:::,

C 100000
.Q
0
L
-100000
-200000
0 0 0 0 0 0 N N N N
°'' °'' °'>, -'-°' °'Q_ °'
~
';-' ';-' N ';-' N N ';-' ';-' N N N N ';-' ';-' N ';-'
C ro ~
>
0
C
ro >,
~
Q_ > C
0 ro >,
~
Q_ > C
0 ro >, ~
~
L"' ~
L"' z ~ L L"' z ~ L L"'
<IJ <IJ <IJ
L VJ z L VJ VJ

- s-Year Range - 5 Year Average - Actual Storage - Change From 5 Year Average
Source: Energy Informatio n Administration

P ric e
EIA forecasted residential natural gas prices for the Midwest this coming winter are
noticeably higher than the previous winter at $13.22/Mcf, a 29% increase. The
wholesale price for winter ’22-23 natural gas, determined by futures trading on the
Chicago Mercantile Exchange (CME), averaged approximately $7.65/Mcf (thousand
cubic feet) this summer for the coming winter’s future strip. The current prompt
month of November is trading at an average price of $5.92/Mcf demonstrating some
expected easing of prices as winter approaches.

The EIA’s November STEO projects Henry Hub natural gas spot prices to average
$6.05/Mcf for the 4th quarter 2022 with prices rising slightly to an average of $6.68
for the deep winter months of January and February 2023. The EIA’s projected prices
reflect the current and projected tightness of supply and demand with producers
unable to increase production enough to build excess storage levels. The LNG export
markets remain strong in the U.S, with approximately 300 Bcf leaving the country in
July of 2022. The usual seasonal demand increases and the growing LNG exports will
draw down natural gas inventories and keep the market tight throughout the
upcoming winter.

The total residential bill for natural gas service is comprised of the wholesale cost of
gas purchased by Michigan utilities (Gas Cost Recovery (GCR) factor), the cost of
interstate transport and delivery, the monthly customer charge, and the energy
waste reduction surcharge used to implement energy efficiency programs. The
projected weighted average commodity price (GCR factor/fuel cost alone) for
residential customers of regulated utilities in Michigan during the November 2022
through March 2023 winter is currently $6.98/Mcf compared to last year’s actual
average of $4.75/Mcf.

7
 Fig u re 7
Re s id e n t ia l Na t u ra l Ga s Bill Bre a k d o w n
Cost Breakdown (per Mcf)
Commodity Total Average Customer Charge Nov. 2022 - March
Distri bution
Charge Cost (monthly) 2023 Bill Forecast
Four Largest
$6.88 $4.73 $11 .61 $13.62 $1,009
Gas Utilities
Note: commodity charge refers to the price of fuel based on October 2022 average; November 2022 - March 2023 usage is estimated at 81 Mcf.

Fig u re 8
Michigan Natural Gas Demand
(Billion Cubic Feet--BCF)

Total Residential Commercial Industrial Electric Power

Demand Demand Demand Demand Demand
Historical 2019 Total 968.4 332.3 181.8 173.6 280.8
2020 Total 901.1 304.2 160.5 154.1 282.3
2021 Total 871.2 296.0 161.4 158.6 255.1
2022 January 146.4 68.3 31.9 18.7 27.5
February 119.0 52.6 27.6 17.3 21.5
March 102.3 41.3 22.5 17.4 21.1
April 80.3 29.3 16.6 14.7 19.6
May 48.3 10.2 8.2 11.9 18.1
June 51.1 7.1 6.1 9.7 28.1
July 58.7 6.1 5.4 10.8 36.4
Projection August 57.7 6.7 5.6 11.0 34.3
September 49.0 7.0 5.6 11.6 24.9
October 65.9 17.4 9.9 13.5 25.1
November 93.0 37.9 16.9 15.5 22.8
December 119.6 50.7 25.2 18.1 25.6

2022 Total 991.4 334.5 181.5 170.2 305.1

2021-2022 change 13.8% 13.0% 12.5% 7.3% 19.6%
2023 January 146.7 65.6 30.2 20.2 30.8
February 127.6 55.0 26.1 19.1 27.4
March 111.2 42.0 22.4 18.3 28.5
April 84.8 28.0 14.2 15.3 27.3
May 60.3 12.3 8.4 12.7 26.9
NOTE: Projected sales are based on historical trends.
SOURCES: Historical Data – Energy Information Administration (EIA), U.S Department of Energy.
Projection by: MPSC, Energy Security Section, using primarily EIA data
(see methodology section for additional detail).

8
D is t illa t e Fu e ls
De m a n d
Ultra-low sulfur diesel fuel accounts for approximately 99% of total distillate demand,
a majority being used for transportation by highway trucks, with the remainder
consisting of heating oil, kerosene, and No. 1 distillate. Other users of distillates,
although less prominent, include the agriculture, commercial, and industrial sectors,
as well as vessel fueling.

Distillate fuels continue to decline as a primary fuel source for home heating in
Michigan. According to estimates from the U.S. Census Bureau’s American
Community Survey, approximately 35,680 households heated their homes with the
fuel in 2021 – compared to 76,879 households in 2010. Distillate fuel continues to be a
prevalent home heating fuel source in areas of the Northeastern U.S.

Fig u re 9
Historical Michigan Distillate Fuel Oil Sales

120.0
Total
Vl
C
o 110.0
co
l'.J
4-
~ 100.0
C
0

2 90.0

Diesel Fuel
80.0

70.0
Jan- 18 Jan -1 9 Jan-20 Jan -21 Jan-22
Source: Historical data - Energy Information Administration

Su p p ly
For the week ending November 4, 2022 national inventories of distillate oil were 106
million barrels, about 18 million barrels below this same time of last year and well
below the five-year range. Midwest inventories for the same week totaled 24.5
million barrels, 4.6 million barrels lower than a year ago. While national production
levels of distillates remain strong, lower year over year inventories are a result of
increased demand and a robust export market. For the week ending October 7,
national production of distillates totaled 4.86 million b/d, while exports averaged 1.27
million b/d – a year over year increase of 3 percent and 30 percent, respectively.

9
P ric e
Nationally, the EIA expects retail prices for on-highway diesel fuel will average $5.08
per gallon for 2022, an increase of $1.79/gallon from 2021. However, it is expected that
distillate prices will pull back slightly for 2023, with prices estimated to average $4.65
per gallon. According to AAA Michigan, the average price of diesel in Michigan was
$5.54 per gallon on November 15, $2.00 per gallon higher than the price seen at this
time last year.

The average cost of No. 2 heating oil in Michigan was $5.11 per gallon on November 7,
2022, $1.96 per gallon higher than the cost at the same time last year. The principal
price driver for heating oil is the U.S. refiner acquisition cost of crude oil, which
averaged about 27 dollars more per barrel compared to the start of the 2021/22
heating season. Other factors affecting the price of heating oil include the
seasonality of demand from weather conditions, competition in local markets, and
regional operating costs.

Ele c t ric it y
De m a n d
Assuming normal weather, Michigan’s total electric sales for 2022 are projected to
increase 1.5 percent to 100.89 terrawatt-hours TWh compared to 99.4 terrawatt-hours
TWh in 2021. The increase in sales is expected to come from the industrial (4.8%) and
commercial (0.9%) sectors. Residential sector sales are expected to decline only
slightly (-0.3%). Two of the primary drivers of electricity consumption in the residential
market is for cooling during hot weather and home heating during the winter.
Summer 2022 had only 4 percent more cooling degree days than historical averages
– indicating a pretty close to normal summer. Industrial sector usage of electricity,
which is less dependent on weather fluctuations and more highly correlated to
economic activity, grew by 7% in 2021 and is expected to further grow by 4.8 percent
for 2022.
Fig u re 10
Residential Electricity Usage vs. Heating/Cooling Degree Days
5000 1600
I Proiection
4500 1400
4000 A I
£
Vl

3500 A I\ /\ ,..,,. 1200

s I \
I\ I \ I \ ~
1000 >-
Vl

-
-'>I!.

0
3000 1,
I \ , ~- I \ I - \ I \._.../ ' ..- J LJ --
n:l
""O

Vl
C:
_Q
2500
2000
'-/'
-- ~

I
800
600
<I.I
~
O'I
<I.I
0
~
1500
I 400
1000
500 I I• _- I I .I - 200
0 - I II I I IL .111. 1 I I II I
- 0
O"I O"I O"I O"I 0 0 0 0 ,- ,- ,- ,- N N N N rt') rt')
,- ,- ,- N N N N N N
'
C: ....'
CL
'
:::, t
r;-i
C: 1
CL
'
:::, t
r;-i
C: 1
CL
'
:::, t
r;-i
C: 1CL
'
:::, t
r;-i
C: 1CL
-n:l, -, -n:l, -, -n:l -, -n:l, -, -n:l,
<( 0 <( 0 , <( 0 <( 0 <(

- Cooling Degree Days - Heating Degree Days - Residentia l Usage

10
Michigan’s combined coincident peak electrical demand, for both the Consumers
Energy and DTE Electric service areas this summer was 17,711 megawatts (MW).
Consumers Energy’s bundled peak electric demand this summer was 7,529 MW and
occurred on June 21, 2022. DTE Electric’s bundled peak demand was 10,182 MW and
was also on June 21, 2022.

Su p p ly
During the 2021 summer cooling season, neither DTE nor Consumers Energy had to
interrupt service to their customers due to emergency operating conditions.
Furthermore, no supply shortages or transmission constraints are expected to affect
the ability of Michigan utilities to meet peak electric demand for this winter. In
addition to power that they generate, Michigan utilities can purchase external
electricity supply from wholesale markets administered by MISO and PJM as needed.

P ric e
Year-over-year changes in residential electrical bills can vary substantially from utility
to utility, with some residents seeing their bills decrease while other bills increase.
Residential bills in areas of the Central and Western Upper Peninsula, where
population densities tend to be lower and the local power grid is challenged by
various constraints imposed on and by the surrounding electrical generation and
transmission systems, continue to be some of the highest in the state.

11
 Fig u re 11
Mic h ig a n Ele c t ric Ra t e Co m p a ris o n (O c t o b e r)
2021 2022 Percent
Mont hly Bill I <t/ kWh Mont hly Bill I <t/ kWh Change
INVESTOR OWNED
A EP (l&M) Com bined $86.00 17.20 $86.05 17.21 0.1%
A lpena Power $68.75 13.75 $68.27 13.65 -0.7%
Consumers Energy $93.30 18.66 $91.71 18.34 -1.7%
DTE Electric $90.25 18.05 $92.06 18.41 2.0%
Northern States Power $68.00 13.60 $87.01 17.40 28.0%
UM ERC - (FO RM ERLY W EPCO) $74.85 14.97 $108.09 21.62 44.4%
UM ERC - (FO RM ERLY W PS) $67.70 13.54 $107.07 21.41 58.2%
Upper Peninsula Power $111 .55 22.31 $11 4.42 22.88 2.6%

COOPERATIVE
A lger Delta $102.42 20.48 $102.40 20.48 0.0%
Cherryland $77.55 15.51 $81.55 16.31 5.2%
Cloverland $70.48 14.10 $73.48 14.70 4.3%
Great Lakes $88.11 17.62 $94.00 18.80 6.7%
Homeworks Tri-County $90.44 18.09 $98.75 19.75 9.2%
Midwest $95.60 19.12 $108.92 21.78 13.9%
Presque Isle $77.39 15.48 $87.68 17.54 13.3%
Thumb $82.01 16.40 $82.01 16.40 0.0%

Note: Monthly Bill calculations are based on usage of 500 kWh/month and exclude state sales tax.

12
 Fig u re 12

Michigan Electricity Sales

4,500
Projection

4,000
Millions of kWh

3,500

3,000

2,500

2,000

1,500
Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
Residential Commerical Industrial
Source: Energy Information Administration

13
 Fig u re 13
Michigan Electricity Sales Projection
(Millions of kWh)
Residential Commercial Industrial Total

Historical 2019 Total 33,496 37,862 29,886 101,244

2020 Total 35,695 35,491 24,972 96,158
2021 Total 35,764 36,891 26,745 99,400
2022 January 3,354 3,216 2,275 8,844
February 2,880 2,845 2,139 7,864
March 2,771 3,070 2,323 8,164
April 2,459 2,727 2,262 7,448
May 2,588 2,999 2,342 7,929
June 3,133 3,302 2,422 8,857
July 3,741 3,568 2,420 9,729
Projection August 3,584 3,495 2,483 9,562
September 2,722 3,098 2,396 8,216
October 2,553 3,039 2,402 7,993
November 2,673 2,862 2,309 7,844
December 3,192 2,992 2,256 8,441

2022 Total 35,650 37,213 28,028 100,891

2021-2022 change -0.3% 0.9% 4.8% 1.5%

2023 January 3,295 3,060 2,231 8,585

February 2,900 2,789 2,231 7,921
March 2,820 2,916 2,337 8,073
April 2,461 2,740 2,218 7,418
May 2,525 2,936 2,352 7,813

NOTE: Projected electricity sales are based on historical trends.

SOURCES: Historical Data – Energy Information Administration, U.S Department of Energy.
Projection: MPSC, Energy Security Section, using primarily EIA data
(see methodology section for additional detail).

14
Mo t o r Ga s o lin e
De m a n d
Fig u re 13
Historical Michigan Gasoline Consumption
15.0%
10.2%
10.0% -
3.8%
5.0% -
1.4% 1.5% 2.0%
0.4%
0.0% I I I I
Percent Change

I I I I
I I

-5.0% -
-1.4%

-10.0% -

-15.0% -
-14.9%
-20.0%
2014 2015 2016 2017 2018 2019 2020 2021
Source: Energy Information Administration

Su p p ly
Refinery utilization rates for the Midwest averaged 91.4 percent throughout the
summer driving season. As of November 4, the PADD 2 region 1 held 45 million barrels
of gasoline inventories, 500 thousand barrels more than this same time last year. On
a national level, gasoline inventories are 3.3 percent lower than last year and below the
five-year range for this time of year.

P ric e
According to AAA Michigan, the average price for a gallon of regular unleaded
gasoline in Michigan on November 15, 2022, was $3.99 compared to $3.40 a year ago.
The EIA expects Midwest retail regular grade gasoline prices to average $3.89/gal for
2022 and $3.46/gal in 2023. Higher crude oil prices relative to last year are a driving
factor for higher prices seen at the pump. The EIA projects Brent crude oil to average
$102/barrel for 2022, compared to only $70.99/barrel seen in 2021.

1
PADD 2 region comprised of Michigan, Ohio, Indiana, Kentucky, Tennessee, Illinois, Wisconsin, Missouri,
Iowa, Minnesota, North Dakota, South Dakota, Nebraska, Kansas, and Oklahoma.

15
 Fig u re 14
Midwest Retail Gasoline Price vs. Brent Crude Oil Price

$1 4 0.00 $6.00

$120.00
$5.00

$100.00
$4.00 C
~ -2
"'
co $80.00 Gasoline "'
1.9
a, $3.00 a,
Q.. Q_
~ $60.00 ~
~ ~
0 0
0 $2.00 0
$40.00
Brent Crude Oil
$1.00
$20.00

$0.00 $0.00

Source: Energy Information Administration

P e t ro le u m
U.S. O u t lo o k
The EIA’s November Short Term Energy Outlook (STEO) revised U.S. crude oil
production figures downward slightly from just a month ago. U.S. crude oil
production averaged 11.25 million b/d in 2021 and is expected to increase to 11.83
million b/d for 2022 and up to 12.31 million b/d in 2023. The price for WTI began to
steeply increase in 2022, rising from $83/barrel in January to a high of $114/barrel in
June. A major contributing factor to the rising prices in 2021 and into 2022 was the
backwardation of crude oil markets. Backwardation in a market occurs when nearer
futures contracts command a higher price than longer dated contracts. This behavior
typically arises when the market is undersupplied in the near term, which then acts
to drive up prices. As of the week ending November 4, 2022, the futures market for
light sweet crude oil at Cushing, OK was still in backwardation, with the prompt
month at $87.03/barrel and $83.38/barrel for February 2023.

U.S. crude oil stocks currently reside 5.7 million barrels higher than a year ago. As of
November 4, 2022, the U.S. had 440.8 million barrels in inventory (1.3% increase relative
to 2021) which stands near the middle of the five-year range for this time of year. U.S.
crude oil exports have declined recently, with the weekly average ending November
4, 2022, standing at 3.52 million barrels per day – down from this year’s high of 5 million
b/d in August.

16
 Fig u re 15
Crude Oil Production
6,000

5,000
>.
co
0
,._ 4,000
<lJ
Cl.
V'l

~
,._ 3,000
co

-co
0 2,000

-
V'l North Dakota
"'O
C Oklahoma

z'
co
V'l 1,000
:J Colorado
0
£
I-
0
1,\Jr::,0; 1,\J'\\J 1,r::,"" 1,\J'\1, 1,\J'\? 1,\J'\~ 1,\J'\? 1,r::,"ro 1,r::,"' 1,\J'\'o 1,\J'\O; 1,r::,1,\J

Source: Energy Information Administration

Fig u re 16

U.S. Crude Oil Demand and Net Imports

18

16
co
>, Crude Oil Refine
0
14
,._
<lJ
Cl. 12
V'l
<lJ
t: 10
co Production
-
co
0
V'l
C
8

0 6
Net Imports
~ 4
2
,!'\,\? ,l'\,\b. ,!'\,\? ,I'\,\'<> ,"\,\1 (\,\<o (\'\~ (\;2,0 (\'/ ,\ ,l'\,'l,'1-
\~'' \~'' \~'' \~'' \~'' \~ \~ \~ \~ \~''
Source: Energy Informatio n Administration

W o rld O u t lo o k
The EIA November STEO reports that global petroleum consumption will increase by
2.26 million b/d in 2022 and again rise by 1.16 million b/d in 2023. The increase for 2022
is attributed to both non-Organization for Economic Cooperation and Development
(OECD) nations, as well as more developed regions. The last time global petroleum
consumption declined on an annual basis was in 2020 due to the impacts of the
COVID-19 pandemic; and before that in 2009 due to the 2007-08 Financial Crisis.

17
Global petroleum production and supply is expected to rise by 4.24 million b/d in 2022
and further grow 0.74 million b/d in 2023. The 2022 consumption and production
projections demonstrate why oil prices are expected to ease in 2023. When global
supply growth outpaces consumption, the result will be an increase in global crude
oil inventories and subsequent weakening in prices. In October, the Organization of
Petroleum Exporting Countries (OPEC) and non-member Russia announced they had
agreed to decrease output by 2 million b/d. However, the cut in production is expected
to be closer to 1 million b/d due to some member countries not meeting their
expected quota.

EIA projects that West Texas Intermediate (WTI) crude oil will average $95.88/bbl for
2022 and $89.33/bbl in 2023. The Brent (North Sea) crude oil spot price is forecast to
average $102.13/bbl and $95.33/bbl, respectively. WTI and Brent are light sweet
crudes used as international benchmarks in spot market pricing. The price of crude
oil is closely tied to that of gasoline, as seen in the graph below.

Fig u re 17
U.S. Crude Oil and Midwest Gasoline Prices
$1 30.00 $6.00

$110.00 $5.00

$90.00

$70.00
_,_ $4.00

$3.00

$50.00 $2.00

$30.00 $1 .00

$10.00 $0.00
,- ,- ,- ,-

- - -
0 0 0 0
°'' °'' N N
0) 0) N
N N N N N
C: ' C:
r:-i r:-i ' C:
r:-i r:-i ' C:
r:-i r:-i
~
0.. ~ u
~
0.. ~ u
~
0.. ~ u
~
0.. ~
<{ 0 <{ 0 <{ 0 <{

Crude Oil - - - Gasol ine

Sources: U.S. Energy Information Administration, Short-Term Energy Outlook October 2022.
Note: Gasoline prices are for regular unleaded, including taxes.

Mic h ig a n Ho u s e h o ld W in t e r He a t in g Fu e l Su m m a ry
The Winter Heating Fuel Summary depicts what a typical Michigan household is
projected to consume and spend on their primary heating fuel during the 2022-2023
winter heating season. Actual usage for any given home will depend on a number of
factors, including the relative energy efficiency of the home, the home’s location and
size, the occupants’ individual heating preferences, and the number of heating units
or appliances in the home.

18
Residential natural gas expenditures are expected to increase by $274 compared to
last winter’s projection, due to higher commodity prices for natural gas. Accordingly,
the Winter Heating Fuel Summary assumes that current fuel prices will continue to
Michigan Household Winter Heating Fuel Summary hold steady throughout the
2022-2023 Projected Residential Heating Season Expenditures
1 winter, but acknowledges that
Weather Normalized these prices are often volatile,
and can change rapidly as
10% Below Midpoint 10% Above
Natural Gas dynamic supply and demand
Consumption (Met) 73 81 89 conditions are impacted by
Avg. Price ($/Met) $10.60 $11.78 $12.96
severe weather, infrastructure
Expenditures ($) $834 $1,014 $1 ,213
failures, geopolitical instability,
Heating Oil and other issues.
Consumption (gallons) 370 418 460
Prices for heating oil and
Avg. Price ($/gallon) $3.96 $4.40 $4.84
Expenditures ($) $1,465 $1,839 $2,226
propane have started the
2022/23 winter heating season
Propane above levels seen last year
Consumption (gallons) 581 645 710 due to higher crude oil prices
Avg. Price ($/gallon) $2.22 $2.47 $2.72 and lower stocks at the
Expenditures ($) $1,290 $1,593 $1,928
national level. Winter
expenditures for propane and
1
Projections assume normal weather. Consumption, pricing, and expenditure data pertain heating oil are projected to
to the winter heating season, which runs from November through March. Natural Gas
prices are based on the October average rates for Michigan gas utilities, including increase by $75 and $543
distribution, customer charge and the cost of gas. Heating oil and propane prices are respectively compared to
what was projected a year ago
based on the residential price in Michigan for the first week of October. All prices are
assumed to hold constant over the winter. Projected usage is based on EIA and MPSC data
and calculations from MPSC staff. using the first week of
October average prices.
Should this season’s winter temperatures deviate from historical norms, the National
Oceanic and Atmospheric Administration (NOAA) anticipates that it may do so
toward colder temperatures, this could further raise heating costs for Michigan
households.

Co n c lu s io n
As the winter heating season begins, residents should expect energy supplies to be
readily available to meet their needs. Michigan’s energy systems remain robust and
are well positioned to meet the evolving needs of consumers in the state. MPSC Staff
will continue their work to ensure this robustness and remain watchful for the ever-
present risks to the state’s energy systems.

19